Lukoil explores Africa's west coast

Russia's Lukoil is one of the world's biggest vertically integrated companies for the production of crude oil and gas as well as refining them into petroleum products and petrochemicals. The company is a leader on both Russian and international markets in its core business, and its key mission is to harness natural energy resources for human benefit. The company also supports long-term economic growth, social stability, prosperity and progress in the regions where it operates.
Pavel Bogomolov, Government & Public Relations Manager of Lukoil Overseas Ghana Ltd, spoke to Kester Kenn Klomegah of Buziness Africa about the company’s operations of Lukoil in Ghana and its plans to expand business operations to other African countries, such as Cote d'Ivoire and Sierra Leone.

Buziness
Africa: What are Lukoil’s priorities in Africa and what is the level of Lukoil
company's involvement in the economy of
Africa?

Pavel Bogomolov: However modest our
priorities may seem at the moment, Lukoil’s current plans for 2011-2012 are
strictly focused on the attempt to carry out exploration and subsequently, the
appraisal of our 3 offshore blocks in Cote d'Ivoire, 1 block in Ghana and, in
the near future, yet another block in Sierra Leone that has been acquired. All
this does not exclude the probability of some additional acquisitions of
upstream projects in the waters of other West African states. Lukoil Overseas
will resume active operations under the CI-205 project as soon as the situation
in Cote d'Ivoire subsides.

But, once again, we would draw the attention
to the fact that, geographically, Lukoil’s expansion is now still limited to
the Gulf of Guinea, although we also demonstrate some interest in those remote
opportunities that are on offer in other parts of Africa. Taking the above into
account, we would say that the level of our company's involvement in the
economy of the region is not so high yet, and quite understandably so.

Usually, it is only after the establishment
of some commercial reserves of crude that the oil majors decide on the
continuation of their business presence in the corresponding countries. This
brings about some increasing volumes of the companies' multi-faceted
involvement in the local economy as a whole. Certainly, we have not yet reached
such a determining point of our investment program in West Africa so far.

B.A.:
What difficulties does Lukoil faces on the continent? Do you think that some government
policies pose some problems to the smooth operations of your company in Africa?

Pavel Bogomolov

P.B.: Until now, the only real difficulty Lukoil
has faced on the African continent was the recent constitutional crisis and
armed conflict in Cote d'Ivoire. Those lamentable events temporarily paralyzed
foreign investment in that country. But otherwise, we do not truly believe
that, in general terms, African leadership and government policies pose serious
problems to our operations in the region.

B.A.:
What kinds of competition do you face from related companies (both local or
foreign) in similar oil exploration and extraction, as well as refining spheres
in Africa?

P.B.: As regards the refining sector, we
would like to specify that, for the time being, Lukoil is not planning any
involvement in refining or other spheres of downstream in West Africa.
Therefore, it is only upstream activities where your question about competition
might sound relevant to us, but only in theory, because in practice, we do not
face any true competition from any rivals, local or western.

However, your question might acquire more
validity in the future when the waters of the Gulf of Guinea will become a lot
more crowded and some controversies about the best possible export schemes and
most profitable routes would possibly emerge.

B.A.:
In future, would LUKOIL like to redefine or diversify its priorities there? And
in what directions?

P.B.: Such a redefinition or diversification
of our priorities, although not guaranteed 100 percent, might hypothetically
happen as a result of our appraisal program offshore. And, of course, these
steps would not be made unilaterally, but together with our partners including
such national petroleum companies as GNPC and PETROCI, as well as the American
shareholder of some of our joint projects, Vanco. Lukoil’s senior management
has emphasized on more than one occasion that, if the quantity of the reserves
to be evaluated on our blocks proves to be sufficient for their industrial
development and exports, some intensifying and broadening of this regional
program would become likely to consider.

B.A.:
What additional useful information would you like to give to policy makers,
politicians and oil business executives in Africa?

P.B.: We believe that, apart from our direct
investment (which in Ghana alone had already totaled $200 million dollars),
there are also some additional advantages of a dialogue with Lukoil. Such
benefits are worth appreciation and use by African policy makers and business
people. This is all primarily about Lukoil’s high professional and ethical
stance in the national and global entrepreneurial community.

Indeed, our energy giant, while celebrating
its 20th anniversary this year, attributes a huge deal of importance to the
so-called "oil diplomacy" in the best sense of this formula. It is
precisely Lukoil that gives Africans the widest access and introduction to the
modern business world of Russia. For instance, last year our company became the
organizer, sponsor and the key partner to the biggest-ever African public
gathering at Moscow's Radisson Hotel where the first Russia-African Inter-parliamentary
and Business forum were successfully held.

Equally, it is Lukoil who presents African
arts, including the brilliant Noyam folkloric dance ensemble, to our
fellow-citizens. We are also launching a highly promising program of multi-year
bachelor & master degree studies for competitively selected Ghanaian
students at the Moscow State University of Oil and Gas in such faculties as
petroleum geology, field development, etc.

The advantage of this program is that Lukoil
will take care of their pre-diploma practice on the Russian oilfields and,
after that, their post-university employment with Lukoil’s West African
projects.

Next year, probably, we might be able to
share our vision of certain directives for our humanitarian cooperation in some
other countries of the Gulf of Guinea area, for example, Sierra Leone. And,
finally, Lukoil uses every single opportunity to take African colleagues to our
oil rigs in the Caspian Sea for their acquaintance with our "zero-contamination"
technologies. While judging all these you will unavoidably come to the
conclusion that the pioneer of the Russian vertically-integrated petroleum
business really contributes to this starting period of Russian-African "cooperation's
renaissance" somewhat more than just project investment.